Tax plan will benefit the small business next door

Bill Laverty lives in Montgomery and is the retired founder and president of Partner Healthcare IT, one of the largest Healthcare IT consulting and staffing firms in the U.S.

As the Trump administration looks to undertake tax reform, I continue to hear this plan is ultimately just a “tax break for the rich.” Along with this refrain comes talking points that tax reform will only help the “corporate fat cats on Wall Street.”

Nothing could be further from the truth. Frankly, the average U.S. business is not JP Morgan Chase, P&G, or Kroger. It’s Mary and John who live next door and run a tree-cutting service, dry cleaner, or small software firm in their basement. Ninety-nine percent of American businesses are small, with an average household income of $68,000. As a matter of fact, 80 percent of the Marys and Johns go out of business within their first five years of operation.

I know this struggle firsthand because I founded and owned a small Healthcare IT consulting and staffing firm in Cincinnati. Unlike Mary and John, I didn’t make close to $68,000 in my first year. However eight years later, after hard work, determination, and sacrifice, my company was able to employ hundreds of people in high-paying tech jobs.

Under President Obama and for the first time in U.S. history, more small companies went out of business than were started. That’s not only bad for Mary and John. It’s disastrous for you. Small businesses are the source of the majority of American employment, new job creation, and wage growth. The Mary and John of today often become the Graeters and Paycor of tomorrow.

Thankfully for Mary and John, the Trump administration has put forth a well-designed and far-reaching tax reform package that is designed to decrease the corporate tax rate, incentivizing capital investment and simplifying the tax code.

At a combined tax rate of 39 percent, the U.S. has the highest business tax rate in the industrialized world. Over the past 25 years, rates across the developed world have fallen, while the U.S. business tax rate increased and as a result, many U.S. companies have moved their facilities and jobs out of the country. The administration’s plan will lower our business taxes from 39 percent to 20 percent and consequently, companies will finally be incentivized to bring operations back, leading to domestic job growth and ultimately creating a windfall in tax revenue that can be used to fund infrastructure projects that are desperately in need of cash.

During the past eight years under President Obama, Americans experienced the most anemic recovery on record, hitting middle-income Americans the hardest. The middle class saw their average income fall by 4.6 percent and their net worth decrease by 19 percent. The Trump tax plan addresses this by greatly incentivizing businesses to increase capital investment. That investment can be expensed immediately instead of depreciating the cost of capital over a long period.

This means businesses will immediately start spending money on new projects, new production, and new product launches. This will give our economy a jumpstart and greatly increase hiring to staff these new initiatives. When the economy grows and hiring increases, wages increase as companies vie to attract talent to compete.

As of today, the tax code has grown so out of control in length and complexity most individuals and 91 percent of businesses hire someone to do their taxes. The instructions alone for the typical Form 1040 have gone from 2 pages in 1935 to 241 pages today. Simply complying with the tax code puts a $262 billion burden on the economy. The only winners under the current overly complex scheme are the IRS and the tax preparation industry. The Trump plan will restore fairness by greatly simplifying the tax code and closing special interest loopholes.

Will the Trump tax plan work? The Democrats need to look no further than their own party to answer that question. Democrats adopted an almost identical plan in 1964 when Presidents Lyndon Johnson/JFK, with strong bipartisan support from Congress, passed the Tax Reduction Act. This plan led to an economic boom that lasted a decade.

Let’s pull together to get this passed. Mary, John and their next-door neighbors are depending on it.